Don’t Buy Based on Greek Deal

Investor’s first read Daily edge before the open

DJIA: 17,760
S&P 500: 2,076
Nasdaq  Comp.:  4,997
Russell 2000: 1,253

Monday, July 13, 2015   8:59 a.m.

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STATUS OF MARKET:  Bull with volatility within consolidation pattern

RISK: Above average with news sensitive market

CASH RESERVE: 25%

OPPORTUNITY: Whipsaw gives nimble trader chance to exploit extremes

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TODAY:

     Pre-market trading in futures was less than robust prior to the open today, even with the weekend announcement of a deal between Greece and its creditors, heading off a default and exit from the euro.

     I think the U.S. economy is the key to the direction of stocks from here. The Street would love “firm” but not “robust,” as it would buy time before the Fed bumps interest rates up.

Resistance today:  DJIA: 17,946; S&P 500:2,093; Nasdaq Comp.:5,0501.

Support today  DJIA: 17,743; S&P 500:2,074 ; Nasdaq Comp.:4,983

SUMMARY 

      This has been a classic news whipsaw, hopefully China and Greece’s influence will wane from now, so the Street can focus on the U.S. economy and corporate earnings which will begin to flow this month.

     Last week’s rebound in China’s stock markets and a weekend agreement between Greece and its creditors will take some of the uncertainty off the table.

     The biggest factor here is the U.S. economy.  Will it rebound from its reported Q1 slump, which most likely  was distorted by weather, oil prices, the impact of a strong US dollar, even seasonality ?

     Recession does not look like a risk, so much as a “pause” in the economy.

      Q2 earnings will begin to flow in coming weeks.  FactSet Research sees year-over-year  for Q2  coming in as a decline of 4.5% with a return to growth developing in Q4 of close to +4.2%.

       Most likely, all this was the reason for the five-month flat trading range that was interrupted by dual negatives (China and Greece).

Q2 EARNINGS

       BEWARE of crunches in stock prices of companies that “miss” projections, or simply don’t “beat” by enough.  This is an area where I think certain stock prices are manipulated by shorts or institutions that want to accumulate larger positions.     

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THE FED

      The guessing game continues – Will the Fed bump interest rates up in September, or later ?

      Obviously, their decision will key on the strength of the U.S. economy where housing is taking the lead and now consumer expectations are soaring.

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My Technical Analysis of the 30 DJIA Companies:   LOWER

On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the DJIA “divisor” (0.1498588) to get the DJIA for those levels.
     As of  July 2,  a reasonable risk is 17,527; a more extreme risk is 17,380 The upside potential is has dropped with the market’s inability to follow through last week and is now 17,948.

   

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KEY EXTERNAL FACTORS: 

-Stock market bubble – China
Q2 earnings for some companies will suffer from U.S. dollar’s strength and plunge in oil prices.
-Market still keyed on the Fed and it’s first bump up in interest rates, which with a slight softening in recent economic reports looks like it may happen later rather than sooner.
Recent strength in employment and housing industry shifting concern from a weakening in the U.S. economy to enough strength to prompt an early bump up in interest rates.

-Greece

Note: Source of economic data

For a weekly economic calendar and good recap of  indicators, go to mam.econoday.com.

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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication

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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk

 

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